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again in 2013 to Rmb74bn. According to a recent study by Bain, about 60 per cent of
the Chinese consumers who buy luxury goods have used daigou at some point.
The business is thriving for several reasons. Many Chinese believe the same product
is better made when bought overseas because of the mainland’s uneven reputation
for quality. The rising strength of the renminbi, growing purchasing power of
Chinese consumers, and a spate of high-profile food security scandals in China, have
also spurred demand for safe and high-quality foreign products.
Mo Daiqing, an analyst at the research centre, says the main reason Chinese are
turning to daigou is because China imposes hefty import tariffs on luxury goods. For
example, it levies a 50 per cent duty on cosmetics, one of the
dominant daigoucategories, and that is before the imposition of the standard 17 per
cent value added tax that is added to imported luxury products.
“The same brands of milk powder, cosmetics and handbags are much cheaper in
Hong Kong, the US, Japan and South Korea than in mainland China,” said Ms Mo.
But the industry is increasingly drawing attention from customs officials in mainland
China and Hong Kong, particularly with the rising numbers of so-called “parallel
traders” who take advantage of multi-entry visas to cross the border at the southern
Chinese city of Shenzhen many times a day, carrying products for resale that they do
not declare at customs.
Dong Yizhi, a lawyer who specialises in ecommerce, points out that
the daigoubusiness is not illegal if the agents pay import taxes, but says that when
agents pay duties the premise of the business becomes moot.
“If they pay customs duties, the price disparities will be much smaller and they won’t
make money,” said Mr Dong.
Chinese citizens can legally import Rmb5,000 ($823) of duty-free goods for personal
use each time they return to the mainland. But Shenzhen customs officers are taking
a tougher line on parallel traders who cross the border back into the mainland more
than once a day with goods over the value of Rmb500.
Liu Lizhen, a Shenzhen customs official, said the move was aimed at clamping down
on the abuse of the multiple re-entry system. This has become a more serious issue in
Hong Kong since 2009 when it started allowing Shenzhen permanent residents to
enter the former British colony without restrictions.
“We once found a person who had crossed the border 26 times a day,” said Ms Liu.
According to the Shenzhen customs bureau, more than 20,000 parallel traders
operate at the six land border checkpoints between Hong Kong and the southern
Chinese city. Hong Kong’s immigration department said just over a thousand parallel
traders were arrested last year for breaching the terms of their stay in the territory.
Despite the crackdown, May Liu, the daigou agent, says she is not worried, and still
travels to Shenzhen a few times a week.
“Carrying so much stuff across the border every time provides me with a lot of
exercise. I don’t even have to go to the gym,” jokes Ms Liu.